Argentine debtors are now subject to employee take-over under the nation’s recently amended bankruptcy code, signed into law by the nation’s President, Cristina Fernandez de Kirchner. Argentine Bankruptcy Law 24,522 as amended by Law No. 26,684,1 allows employees of a bankrupt company who have established a union or cooperative to (i) suspend the enforcement of claims that are filed by creditors for up to 2 years and (ii) ask the judge to appoint the cooperative as the successor to the debtor’s management.

Bankruptcy courts have long debated the issue of whether an unsecured creditor can recover post-petition legal fees under the Bankruptcy Code. In the recent decision of In re Seda France, Inc. (located here), Justice Craig A.

On June 28th, the Bankruptcy Court overseeing the liquidation of Bernard Madoff's broker-dealer ruled that investors in funds that in turn invested with Madoff are not claimants within the meaning of the Securities Investor Protection Act. SIPC v. Bernard L. Madoff Investment Securities LLC. See also Reuters.

On June 28th, the Second Circuit held that payments made by Enron to redeem its commercial paper prior to maturity were not avoidable under the Bankruptcy Code. In doing so, the Court answers in the affirmative an issue of first impression among the appellate courts: whether the Bankruptcy Code's safe harbor, 11 U.S.C. Sec. 546(e), which shields settlement payments from avoidance in bankruptcy, extends to an issuer's payments to redeem its commercial paper prior to maturity.

The United States Court of Appeals for the Seventh Circuit issued its much anticipated decision in In Re River Road Hotel Partners, LLC, __ F.3d __ (7th Cir., June 28, 2011). In the closely watched case, the Seventh Circuit declined to follow the Third Circuit’s decision in Philadelphia Newspapers, 599 F.3d 298 (3d Cir. 2010), holding instead that secured lenders have the right to credit bid in “free and clear” asset sales where their liens are being stripped, whether those sales occur under section 363 of the Bankruptcy Code or under a chapter 11 plan.

The United States Court of Appeals for the First Circuit upheld a bankruptcy court’s ruling that, where subordination agreements lacked explicit provisions addressing the payment of post-petition interest on senior unsecured debt, the agreements were ambiguous, and an inquiry into the parties’ intent was required. After probing the facts and analyzing New York law, the bankruptcy court determined that the contracting parties did not intend to subordinate the junior unsecured debt to post-petition interest on the senior debt.

Background

Enron seems like ancient history but the Second Circuit has just issued an important decision in an Enron appeal confirming that the redemption of commercial paper made through DTC is entitled to the Bankruptcy Code § 546(e) exemption for “settlement payments” and, therefore, exempt from attack as preferential transfers. The Second Circuit held that this is so even though the Enron redemption payments were made prior to stated maturity, becoming the first Circuit Court of Appeal to address this issue. Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V.

On June 23rd, the First Circuit addressed the priority of claims asserted by senior noteholders and junior noteholders of debt issued by an insolvent bank. It affirmed the bankruptcy court's finding that the parties did not intend for the senior noteholders to receive post-petition interest payments prior to the junior noteholders receiving a distribution. In re: Bank of New England Corporation, Debtor.  

On June 7th, Bloomberg reported that the FDIC, as receiver for Downey Savings & Loan Association, has sued Amerifund Financial Inc., a mortgage broker. The FDIC alleges that Amerifund altered or misstated borrowers' financial information while processing mortgage applications for Downey. Lawsuit.  

On June 7th, the Eleventh Circuit affirmed the entry of summary judgment dismissing Chapter 13 debtors' claims against Wells Fargo, which holds debtors' mortgages. Debtors alleged that Wells Fargo violated the Bankruptcy Code's automatic stay provisions by recording in its internal records the fees it incurred to file its proof of claim. The Eleventh Circuit held that Wells Fargo did not violate the automatic stay because it had not collected or attempt to collect those fees. Similarly, a claim based on Wells Fargo's failure to disclose the fees was not yet ripe for action.